The Worker, Retiree, and Employer Recovery Act was signed into law at year-end 2008, Among its many provisions, this law suspends minimum required distributions (MRDs) from IRAs in 2009.
If you or your parents are older than 70-1/2, the usual 50% penalty will not apply this year if little or nothing is withdrawn from an IRA.
Congress felt that seniors would be forced to sell securities at low prices in order to meet the MRD rules, so those rules are not in effect this year. When weighing this tax break, consider:
The IRA charitable rollover is less appealing. This rollover is available only to individuals over 70-1/2, who can fulfill their MRD obligations without picking up taxable income if the money goes directly from an IRA to charity. If you don’t need to take MRDs, you might prefer to let the money stay in your IRA, where it can grow, tax-deferred.
Roth IRA conversions are still attractive. Even if you don’t have to take MRDs, you might want to transfer depressed securities from a traditional IRA to a Roth IRA. You’ll owe less tax on the conversion because the securities have lost value and future appreciation may be tax-free, in a Roth IRA. To execute a conversion in 2009, your income can’t be over $100,000.
